On Main Streets across America, the nation’s 5.3 million small businesses remain hobbled by a banking system that simply does not work for them.

Large Wall Street banks are minting profits through currency swaps and so-called “carry trade” bets against the dollar — and paying big bonuses to boot. Meanwhile, community banks are reeling from a regulatory regime that has essentially frozen commercial real estate lending in place.

The crackdown on lending is so severe that House Banking Committee Chairman Barney Frank complained about “overzealous regulatory actions” in a recent letter jointly addressed to Federal Reserve Chair Ben Bernanke and FDIC Chair Sheila Bair. He warned about the potential for another downward spiral in the economy if small businesses cannot get access to the credit they need.

But letters and tough talk may not be enough to revive the nation’s broken community banking system. To rebuild America’s ability to finance small business, it may be necessary to reinvent community banking, along the lines of George Bailey and the “building and loan” described in Frank Capra’s 1946 classic, “It’s a Wonderful Life.”

After all, almost two-thirds of net new jobs are created by small businesses operating in local markets. Funding to these crucial engines of economic growth remains largely locked down despite trillions of dollars invested in rescuing a few large banks, insurance companies and investment firms deemed “too big to fail.”

Consider, if you will, the case of CIT. Despite an injection of $2.3 billion in taxpayer money, CIT collapsed under the weight of subprime mortgages and student loans, financings it never should have been making. Now small- to medium-sized businesses all across the country are seeing the ghosts of future Christmases without the capital they need to meet payrolls or re-stock shelves for the next year.

CIT, which operated a hybrid structure that bought it partially into the banking regulation framework, is just the latest in a string of institutions that failed because they strayed too far from the simple, profitable business lines that made them successful.

There’s a need to bring back community-based savings institutions that would harken back to the “building and loan” of the post-World War II era.

These new institutions (call them community savings banks) would be small- to medium-sized, with no more than $10 billion in assets. They would be chartered to offer a limited range of loan products — mortgages, home improvement loans, small business loans and perhaps personal credit lines — in a limited geographical area. In order to give these banks a path to profits and to address some of the issues that bedeviled the savings and loan industry in the 1980s, a few contemporary wrinkles will be needed to adapt the community savings institutions for the 21st century.

These banks would be required to have ample levels of capital to absorb risk, and they would be required to hold a certain percentage of each loan they make on their books in order to retain “skin in the game,” even if these loans were government-insured or sold to third parties. In return, they would pay much lower FDIC fees.

The rules would be written so there would be incentives for banks that already are operating along these lines to convert to the new, “limited regulation” charter. They might have a simplified path to regulatory approval and could gain streamlined access to capital markets through public stock ownership or private investment. They would be able to offer a limited number of deposit and investment products, but among these would be inflation-protected Treasury products that would make ordinary savers once again stakeholders in our national debt.

Reinventing the community banking system won’t be easy. Dr. Sung Won Sohn, former chief economist for Wells Fargo who is now teaching at California State University, thinks it would be essential for any new community banks to have “enough products and economies of scale” to be attractive to investors.

But the rewards of a more efficient and more flexible community banking system could be high. Making the transition from regulation-bound and paperwork-heavy commercial banks to simpler and more nimble community savings banks would reduce operating costs and put more capital to work in local communities. The government could take small steps at first, creating demonstration zones in places such as Colorado or California’s Inland Empire, traditional hubs for small business and entrepreneurship, to fine tune the community savings bank concept.

Old-economy bankers such as Janet Yellen, president of the Federal Reserve Bank of San Francisco, were out on the stump last week warning that the economic recovery is likely to be very sluggish. “Unemployment could well stay high for several years to come,” she warned.

But we don’t need to accept the Fed’s version of status quo on banks and bank regulation, nor do we need to reinvent the U.S. economy in order to create millions of new jobs. That economy, which is based on small business and entrepreneurship, already exists in communities all across the nation, and it is highly sustainable. But what we don’t have at present is an effective way to get capital to small businesses and entrepreneurs.

By encouraging locally based lending institutions that operate on a simple model with plain-language rules, housing markets will be stabilized, small- to medium-sized companies will gain a ready source of capital, and investors in these banks should profit steadily over time.

And a stable, profitable, community-based banking system, based in the private economy and not government cash, should put the U.S. economy on sound footing for decades to come.

Henry Dubroff formerly was business editor of The Denver Post and editor of the Denver Business Journal. He is now a writer and entrepreneur who divides his time between Santa Barbara, Calif., and Denver. John Huggins is an entrepreneur and investor who twice has served as economic development director for the city and county of Denver.

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Touch not that statue of Robert E. Lee in Charlottesville. Let it stand, but around it place plaques telling the curious that the man was a traitor to his country who went to war so white people could continue to own black people.